Doing Business In: Taiwan

Lee and Li, Attorneys-at-Law

View firm profile

Taiwan is located in Asia along the Pacific Ring of Fire. Its neighboring countries include, among others, Korea, Japan, the People’s Republic of China (PRC), and the Philippines. This strengthens Taiwan’s position as an attractive economic hub for major economies and emerging markets.



In 50 years starting from 1949, Taiwan went from an agriculture-based economy to being an economic powerhouse and leader in the field of high-tech goods. Its Gross Domestic Product (GDP) grew from US$1.2 billion in 1951 to US$589.5 billion in 2018. According to the World Bank, the GDP value of Taiwan represents 0.95 percent of the world economy. According to the FocusEconomics, it is expected that the GDP will grow 2.0% in 2020 and that economic activity will increase 2.2% in 2021. Further, the inflation rates are expected to average 1.0% in 2020 and 1.2% in 2021, respectively.

Due to the China–US trade war starting in 2018, private equity (PE) investors returned and foreign companies redirected investments to Taiwan to avoid US tariffs against China. According to Bloomberg, the Taiwanese dollar strengthened 0.1 percent in the third quarter of 2019, which achieved its first quarterly rise since March 2018. The economic growth rates are estimated to be 2.4% in 2019 and 2.34% in 2020 by the Central Bank of the Republic of China (CBC).

Foreign trade has been the engine of Taiwanese rapid economic growth during the past 50 years. The category of export products changed from agricultural products to industrial goods. Currently, Taiwan’s most important industrial export sector is the electronics sector. On the contrary, raw materials and capital goods are Taiwan’s main imported products. According to the World Trade Organization (WTO), Taiwan is the 18th largest exporter in the world with US$335.9 billion in exported goods and the 17th largest importer in the world with US$286.3 billion in imported goods.


Business environment

The amendments to the Company Act were enacted on July 6, 2018 and took effect on November 1, 2018. These amendments, which have had a significant impact on the business environment in Taiwan, can be organized into the following categories:

  • To create a friendly environment for innovation and entrepreneurship;
  • To strengthen corporate governance;
  • To provide more flexibility on corporate management;
  • To protect shareholders’ interests;
  • To promote digitization and paperless processing;
  • To build an international environment;
  • To increase the flexibility of closely held corporations; and
  • To comply with international anti-money laundering regulations.

Please refer to the link for more details about the amendments to the Company Act in Taiwan:

Business Structure

Generally speaking, the business structures that a foreign investor can use to do business in Taiwan with include a company limited by shares, a limited company, a closely-held company, a partnership, a branch of a foreign corporation and a representative office. Most foreign investors choose to start their businesses in Taiwan by forming a subsidiary company, which is a distinct legal entity with the ability to own assets as well as employ workers and is subject to Taiwan taxation. The most common forms of such subsidiary are a company limited by shares and a limited company. A company limited by shares must be established by two or more shareholders or at least one corporate or governmental shareholder. The total capital of a company limited by shares is divided into shares, and the liability of each shareholder is limited to the payments in full for the shares subscribed by the shareholders. A limited company is a company established by one or more shareholders. The liability of a shareholder of a limited company is limited to the amount of its capital contributions. The key comparisons between a company limited by shares and a limited company are set forth in the following table:

Basic Corporate Structure Company Limited by Shares Limited Company
Basic Structure
1.      Number of Shareholders At least 1 corporate, 1 government or 2 individual shareholders At least 1 shareholder
2.      Limitation on Foreign Ownership No restriction No restriction
3.      Number of Directors and Supervisors l   Directors

(1)   With the Board of Directors: at least 3

(2)   Without the Board of Directors: 1 to 2

l   Supervisors:

(1)   Publicly held company: at least 2

(2)   Privately held company: at least 1

(3)   A single-shareholder company may choose not to have any supervisors.

(Note: In principle, directors or supervisors cannot be PRC citizens)

l   Directors: l to 3

l   Supervisors: Not applicable. (Shareholders not conducting the business operations may exercise power of audit.)

(Note: In principle, directors or supervisors cannot be PRC citizens)

4.      Shareholder Meeting l   Must be held at least once a year

l   Function of Shareholder Meeting will be exercised by the Board Meeting for a single-shareholder company

Not applicable (the ultimate authority of a limited company rests with each of the shareholders through the shareholder’s consent)
Capital and Finance
5.      Shareholder’s Liability Limited to the payments in full for the shares subscribed by the shareholder(s) Limited to the amount of capital contributed by the shareholder(s)
6.      Minimum Capital No

(Exception: if the Company wishes to hire a foreign general manager to work in Taiwan – NTD 500,000; if the Company wishes hire expatriates other than the general manager to work in Taiwan – NTD 5,000,000)

7.      Limitation on Retained Earnings 5% undistributed earning tax on undistributed net profit Same
8.      Repatriation of Profits, Capital, Interest Statutory right protected Same
9.      Foreign Exchange Control USD 50,000,000 per year (except for (i) equity-based inflows and outflows; (ii) outward remittance for import/export purposes or service payments)

No restriction on the repatriation of the original investment amount, capital gains or dividends


10.  Legal Reserve Must set aside 10% of annual after-tax profit as legal reserve prior to distribution of profit Same
11.  Profit-Seeking Enterprise Income Tax l   If the total taxable income is more than NTD 500,000, the income tax rate shall be 20%.

l   If the total taxable income is not more than NTD 500,000,

(1)   the income tax rate for the 2018 tax year shall be 18%.

(2)   the income tax rate for the 2019 tax year shall be 19%.

(3)   the income tax rate for the 2020 tax year and thereafter shall be 20%.

12.  Dividend Tax 21% withholding tax (unless any tax treaty applies) Same


Most subsidiaries formed by foreign investors are private companies, which cannot offer their shares for sale to the public before being converted into public companies and applying for the prior approval of the Financial Supervisory Commission (FSC). Thus, when foreign investors would like to have the stocks of their Taiwanese subsidiaries traded publicly on the Taipei Exchange (TPEX) or the Taiwan Stock Exchange (TSE), these subsidiaries must become public companies and apply for the FSC’s prior approval. Public companies are subject to more regulations and reporting requirements to protect investors than private companies.

How to Invest in Taiwan?

Forms of investments in Taiwan include: (1) the acquisition of stock or contribution of capital to a Taiwanese company; (2) the establishment of a branch office, proprietary business, or partnership; and (3) the extension of loans for terms of over one year to those invested Taiwanese companies referred to in (1) and (2). A foreign investor should obtain the foreign investment approval (FIA) from the Investment Commission (IC) of the Ministry of the Economic Affairs (MOEA) when it intends to invest in Taiwan. An FIA entity may enjoy the benefits under the Statute for Investment by Foreign Nationals (SIFN); for example, it has the right to enjoy the same privileges as local investors, including the repatriation of profits, government guarantee against expropriation for certain years, and the waiver of nationality and domiciliary requirements for directors, supervisors and shareholders.


Legal system

Taiwan is a civil law jurisdiction adhering to the rule of law. The civil/criminal procedures in Taiwan basically follow the inquisitorial system and the judge is responsible for directing the proceedings, investigating the evidence, finding the facts, and determining the legal consequences. No jury takes part in the proceedings.

Three levels of courts are established in Taiwan: the District Court, the High Court, and the Supreme Court. These courts have jurisdiction over civil and criminal litigation. A judgment made by the District Court in the first instance may be appealed to the High Court in the second instance, and a second appeal to the Supreme Court is available only for controversies involving a claim over NT$1,500,000, or a possible sentence of more than three years in prison in principle.

Generally speaking, the District Court and the High Court are trial courts that hear factual and legal issues, whereas the Supreme Court, as the third instance, hears a case only when significant legal issues are involved. The following are the main stages in the civil/criminal proceedings: (a) Filing of a complaint/Payment of court costs; (b) Service of process on the defendant; (c) Preparatory proceeding: investigation of evidence and exchange of pleadings; (d) Oral debate session; and (e) Judgment rendered.

Arbitration in Taiwan

Arbitration is the main alternative dispute resolution vehicle. Currently, there are four arbitration associations in Taiwan: the Chinese Arbitration Association, Taipei (CAA), the Taiwan Construction Arbitration Association, the Chinese Construction Industry Arbitration Association, and the Chinese Real Estate Arbitration Association. The CAA has the longest history among these arbitration associations.

The CAA is also capable of handling international disputes in arbitration. Further, the CAA could complete the arbitration proceeding between 6 and 9 months, which is a relatively shorter timeframe compared to the proceedings of arbitration conducted by an international tribunal such as Hong Kong International Arbitration Center or Singapore International Arbitration Center.

Enforcement of Foreign Arbitral Awards in Taiwan

A foreign arbitral award can be enforceable in Taiwan after it is recognized by a Taiwanese court. A Taiwanese court shall dismiss a petition for recognition of a foreign arbitral award if (a) the recognition and enforcement of the arbitration award run afoul of the public order or good morals of Taiwan or (b) the subject matter of the disputes is not capable of arbitration by its nature under the Taiwanese laws. Moreover, the court may dismiss a petition for recognition of a foreign arbitral award, upon the request of the respondent, if any of the circumstances in the Arbitration Law of the ROC occur.

In addition, a Taiwanese court may dismiss the petition for the recognition of a foreign arbitral award if there is no reciprocity in the recognition and enforcement of arbitral award between Taiwan and the country in which the award is made or the country whose arbitration rules are followed.


Foreign investment restrictions

Regulatory Environment

Foreign investment can be divided into foreign (i.e. non-PRC) investment, and PRC investment. In general, foreign investors are subject to less investment restrictions than PRC investors.

  • Foreign Investment

The Taiwan government has adopted various measures to encourage foreign investment in Taiwan. On July 14, 1954, it promulgated the SIFN, which was last amended on November 19, 1997. Under the SIFN, foreign investment may consist of a variety of assets, including (1) cash; (2) machinery and/or supplies required for own use; (3) patent rights, trademark rights, copyrights, know-how and/or other intellectual property rights; and/or (4) other assets approved by the competent authorities.

Foreign investment in the following businesses is prohibited: (1) businesses which are in conflict with national security, public order and/or good morals or might have adverse impact on national health; and (2) any type of business for which foreign investment is prohibited by law. If a foreign investor intends to invest in an industry in which investment is restricted by law or by an order given under the applicable law, such foreign investor shall obtain approval thereof or consent thereto from the competent authority in charge of the industry concerned when applying with the IC for the FIA.

In 1988, the Taiwan government promulgated a set of guidelines called the “Negative List,” which was last amended on June 17, 2013. The Negative List sets forth the sectors in which foreign investment is either restricted or prohibited. Those sectors not on the Negative List are open to foreign investment without any restriction. Generally, except for the restriction stated on the Negative List, Taiwan does not discriminate against any foreign investors.

In Taiwan, a Taiwan company is permitted to distribute the dividends to its foreign shareholders. No prior regulatory approval or registration is required for distribution of dividends to a foreign shareholder. Dividends declared by a company to its foreign shareholders shall be subject to 21% withholding income tax (or a lower tax treaty rate if applicable). Moreover, under the SIFN, a foreign investor is legally granted the right to remit their entire annual investment return out of Taiwan. If a foreign investor transfers their investment upon government approval, the investor is guaranteed by law to repatriate 100% of their total equity investment.

Businesses in which a foreign investor invests are treated the same as local businesses of the same nature. Furthermore, if a foreign investor’s investment is 45% or more of the total capital of an approved enterprise, the enterprise may be exempt from the requirement of having to reserve 10% to 15% of newly issued shares for subscription by its employees.

In addition, under the SIFN, as long as foreign capital accounts for 45% or more of the total capital of the enterprise in which foreign investors invest, specific protection will be afforded to foreign investors against requisition or expropriation for 20 years from the commencement of business, if the foreign continues to hold 45% or more of the total capital.

  • PRC Investment

Unlike the attitude towards non-PRC foreign investment, the Taiwan government takes a more prudent and conservative attitude toward the PRC investment. Hence, PRC investors are subject to more investment restrictions than non-PRC investors in Taiwan.

According to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, a PRC investor should obtain the approval from the IC to engage in any investment activities in Taiwan. Furthermore, a PRC investor is only permitted to invest in the permitted businesses on the “Positive List,” which sets forth the industries that may be invested in by PRC investors as promulgated by the IC of the MOEA on June 30, 2009, and last amended on March 30, 2012. A PRC entity is also required to obtain approval from the competent Taiwanese authorities and establish a branch or a representative office in Taiwan before it may conduct any business activities in Taiwan. The business scope of the Taiwan branch of a PRC-invested entity is limited to its business items registered with the MOEA, which are those listed on the Positive List.

Nevertheless, according to the Regulations Governing Investments by Nationals in Mainland Area (GINMAR), while the area that a PRC Investor intends to invest in is on the Positive List, the IC still has the discretion to restrict or block a PRC investment application if such investment may fall into any of the following situations: (a) the invested enterprise has an exclusive, oligopolistic or monopolistic economic status; (b) the investment is politically, socially or culturally sensitive or would affect national security; or (c) the investment would cause an adverse impact on the local economic development or financial stability. In this regard, this discretionary power possessed by the IC brings greater uncertainty over PRC investments compared to non-PRC investments.

According to the GINMAR, a PRC Investor refers to:

  • an individual, juristic person, organization or any other institution of China (a “PRC Entity“); and
  • any company located in any “third area” (an area other than the PRC or Taiwan) and invested in by any PRC Entity whereby (i) the capital contributed or shares held directly or indirectly by PRC Entities in aggregate exceed 30% of the total number of shares or total amount of capital contribution of said third-area company, or (ii) the PRC Entity has “control” over the third-area company.

With regard to the power of control, a PRC investor is deemed as having control over another company if it:

  • has control over the majority of the votes pursuant to an agreement with other investors;
  • has control over the financial, operational, and/or human resources policies pursuant to the law or regulations or contractual commitments;
  • has the right to appoint or discharge a majority of the directors on the board (or its equivalent organization), which has control over the entity’s operations;
  • has control over the majority of the votes of the directors on the board (or its equivalent organization), which has control over the entity’s operations; or
  • has other controlling power as prescribed in No. 5 and No. 7 of the Statements of Financial Accounting Standards published by the ROC Accounting Research and Development Foundation.

Foreign Exchange Controls

In the past, investments in Taiwan were subject to currency and foreign exchange control. Since 1987, the CBC has promoted a major liberalization of its foreign exchange regulations, which prompted greater business opportunities for two-way, direct, and portfolio investments. The Regulations Governing the Declaration of Foreign Exchange Receipts/Disbursements or Transactions, which were promulgated on August 30, 1995 and last amended on November 13, 2018, are regulated to lift restrictions and provide certain exemptions from the CBC’s prior approval for foreign exchange settlements.

The inward and outward remittances which are not items (a) to (e) below and any inward or outward remittances exceeding the monetary limitations noted below would require the approval of the CBC:

  • Inward and outward remittances for foreign trades in goods;
  • Inward and outward remittances for services;
  • Direct investments and portfolio investments approved by the competent authorities;
  • Inward or outward remittances made by a company or firm of an aggregate amount not exceeding US$50 million in a calendar year, or by an organization or individual of an aggregate amount not exceeding US$5 million in a calendar year; and
  • Inward or outward remittances made by a foreign individual who does not have an alien residence certificate or a person from a jurisdiction not recognized by the Taiwan government as allowed to do business in the country, of an amount per transaction not exceeding US$100,000.

Any person residing in Taiwan who wishes to make an inward or outward remittance of foreign exchange income or expenditure not exceeding the prescribed amount only needs to file a report with a designated bank that handles foreign exchange transactions. Once the report has been filed, the above foreign exchange settlement may be processed by the bank without any further approval from the CBC.

Tax Overview

The Ministry of Finance (MOF) governs the taxation in Taiwan. If a company is duly incorporated in Taiwan based on the Company Act, such company is considered a Taiwanese company regardless of whether it is wholly or partially owned by foreign investor. On the contrary, a company which is incorporated under laws other than those of Taiwan is considered a foreign company from the Taiwanese tax perspective. We only set forth some of the more common taxes, which should not be considered as an exhaustive list of all potentially relevant taxes.

  • Profit-Seeking Enterprise Income Tax

In general, Taiwanese companies are subject to profit-seeking enterprise income tax on their worldwide income, and foreign companies are subject to profit-seeking enterprise income tax on their Taiwan-sourced income only.

The company in Taiwan is subject to a flat rate of 20% on taxable income. However, if the taxable income of the Taiwanese company is less than NT$500,000, then the flat rate is 18% for 2018, 19% for 2019 and 20% for 2020.

  • Undistributed Earnings Tax

If a Taiwanese company does not distribute its net earnings generated in a fiscal year (Year 1) by the end of the following year (Year 2), a 5% undistributed earnings tax will be imposed thereon (Year 3). This 5% undistributed earnings tax reduces the retained earnings available for future distribution by the domestic corporation.

  • Dividend Tax

Dividends (whether in cash or common shares) distributed by a Taiwanese company out of retained earnings and paid out to foreign shareholders are normally subject to Taiwanese income tax collected by way of withholding at the time of distribution. The current rate of withholding for foreign shareholders is 21%, unless a lower withholding rate is provided under a tax treaty between Taiwan and the jurisdiction where the foreign shareholder is a resident.

  • Business Tax

Business tax is imposed on the sale of goods or services within the territory of Taiwan and the importation of goods. There are two forms of business tax: (i) value added tax (VAT); and (ii) gross business receipts tax (GBRT). Business entities under seven industries, namely, banking, insurance, investment trust, securities, futures and commercial papers businesses and pawnshops, are subject to GBRT. Other business entities are subject to VAT.

Current opportunities and future prospects

In light of the Taiwanese government’s policy to promote renewable energy, investment projects to set up renewable energy operation in Taiwan as well as acquisitions in the renewable energy sector have recently become active in Taiwan. Some shareholders sold parts of their equity interest in the renewable energy projects to other investors in 2019. It is expected that there will be more investments or M&A projects in the renewable energy sector in Taiwan in the coming years. Meanwhile, M&A transactions with regard to either private or public companies are still booming in Taiwan. The government is also making efforts to facilitate and foster the development of tech companies, such as fintech, bio-tech or artificial intelligence companies.